Way-low mortgage rates near the end of an era

Average tops 5% for 1st time since last April

Associated Press
A home is offered for sale in Mount Lebanon, Pa. Mortgage rates have been rising since the fall, mostly because of fears that higher inflation is coming. Analysts expect that will continue through the end of the year, to about 5.5 percent.

Gene J. Puskar

This photo made on Jan. 27, 2011, shows a home for sale in Mount Lebanon, Pa. The average rate on the 30-year mortgage topped 5 percent this week for the first time since April. Higher rates could further hamper the struggling housing market ahead of the spring's prime home-buying season.(AP Photo/Gene J. Puskar)

Gene J. Puskar

NEW YORK — The days of the absurdly low mortgage rate are over.

The average rate for a 30-year home loan rose above 5 percent this week for the first time since April — just as Americans are feeling more secure in their jobs and confident about the economy, and just before the big spring homebuying rush.

Freddie Mac said Thursday that the average rate was 5.05 percent, almost a full percentage point higher than in November, when it hit a 40-year low.

Economic signals suggest that the recovery is gaining some momentum.

New claims for jobless benefits came in this week at the lowest in three years, and the unemployment rate has fallen nearly a full percentage point in two months.

Americans are spending more and saving less.

The exception is the beleaguered housing market. Record foreclosures have forced home prices down, and last year was the worst for sales in more than a decade. About the only good news was that qualified buyers could get the deal of a lifetime from their lenders, if they had the means — and the stomach — for the market.

Now rates are rising, and analysts expect that will continue through the end of the year, to about 5.5 percent. The next few months are the busiest for the housing market — about one in three home sales happens in the spring.

Rates have been rising since the fall, mostly because of fears that higher inflation is coming. Investors have been demanding higher yields on Treasury bonds ever since the Federal Reserve announced its program to pump up the economy by spending $600 billion to buy government debt. Mortgage rates tend to track the yield on the 10-year Treasury note.Mortgage rates are still extremely low by historical standards. Anyone who bought a house 30 years ago might remember paying 18 percent on their loan.

And many analysts say low lending rates are less likely to persuade people to buy than, say, reasonable home prices or a steady job market.

"You'll see some effect on demand, but it's really how secure people are in their jobs and how much money they feel they have relative to their homes," says Cristian deRitis, an economist specializing in housing for Moody's Analytics.